Orissa High Court
State Of Odisha & Anr vs Director Of Industries on 20 June, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 24-Jun-2025 16:53:36
IN THE HIGH COURT OF ORISSA AT CUTTACK
A.F.R.
W.P.(C) No. 3376 of 2016
(In the matter of an application under Articles 226 and 227of the
Constitution of India, 1950).
State of Odisha & Anr. .... Petitioner(s)
-versus-
Director of Industries, Micro Small .... Opposite Party (s)
Entrepreneurs Facilitation Council,
Odisha, Cuttack & Anr.
Advocates appeared in the case throughHybrid Mode:
For Petitioner(s) : Ms. Jyoshnamayee Sahoo, ASC
For Opposite Party (s) : Mr. S. Routray, Adv.
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-08.04.2025
DATE OF JUDGMENT:-20.06.2025
Dr. S.K. Panigrahi, J.
1. The petitioners, in the present Writ Petition, are challenging the order
dated 23.08.2013 passed by the Micro and Small Enterprises
Facilitation (MSEF) Council, as well as the order dated 09.03.2015
passed by the learned District Judge, Nuapada in the related
execution proceedings, on the ground that both orders are illegal,
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Location: ORISSA HIGH COURT, CUTTACK
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arbitrary, and passed without jurisdiction, and are therefore liable to
be quashed.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the caseare asfollows:
(i) The State Government, through the Department of Health & Family
Welfare, launched a scheme titled the 'Area Development
Programme’ in 1981, with assistance from the Government of the
United Kingdom. The said programme was implemented in two
phases and formally concluded on 31.03.1996.
(ii) In the course of implementation, the Project Director issued
Procurement Order No. 2522 dated 08.06.1994 in favour of M/s Steel
and Steel Products/Opposite Party No.2, for supply of office steel
tables and steel shelving cabinets to various Primary Health Centres
in the districts of undivided Kalahandi and Bolangir.
(iii) Pursuant thereto, Opposite Party No.2 raised Bill No. 74 dated
25.10.1994 for a sum of ₹1,32,316/-, addressed to the Project Director.
Payment was made via Bank Draft No. 456291 dated 14.02.1995, and
the same was acknowledged under letter dated 16.02.1996. However,
an amount of ₹47,081/- towards transportation, loading, unloading,
and packing charges remained unpaid.
(iv) In 2007, Opposite Party No.2 submitted a revised claim before the
MSEF Council under the provisions of the Micro, Small and Medium
Enterprises Development Act, 2006, seeking recovery of ₹47,081/-
along with compound interest towards unpaid charges for unloading,
transportation, and ancillary services. The claim was founded on a bill
dated 19.03.2007.
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Location: ORISSA HIGH COURT, CUTTACK
Date: 24-Jun-2025 16:53:36
(v) On 03.12.2010, Opposite Party No.2 filed MSEFC Case No. 26 of 2010
before the Chairman, MSEFC (Odisha), claiming a total of
₹43,96,852.43/-, comprising ₹47,081/- as principal, ₹8,57,180.30/- as
interest, ₹2,83,428.50/- towards financial loss, and ₹12,56,243.55/-
towards mental agony.
(vi) On 23.08.2013, the MSEF Council passed an award directing the
Petitioners to pay ₹47,081/- along with compound interest at three
times the bank rate notified by the Reserve Bank of India.
(vii) Upon receipt of the award, the Principal Secretary, Health & Family
Welfare Department, Government of Odisha, vide letter dated
13.10.2014, requested the MSEF Council to re-examine the matter.
(viii) Acting on the said request, the MSEF Council called upon Opposite
Party No.2 to produce relevant documents. Thereafter, on 11.11.2014,
the Council passed an order advising the parties to amicably resolve
the dispute.
(ix) Despite the above, Opposite Party No.2 initiated Execution Case No. 4
of 2014 before the learned District Judge, Nuapada, for execution of
the award dated 23.08.2013 passed in MSEFC Case No. 26 of 2010.
(x) The Petitioners filed objections before the executing court, contending,
inter alia, that the award dated 23.08.2013 stood impliedly recalled or
rendered unenforceable by virtue of the Council’s subsequent
direction dated 11.11.2014. Nevertheless, the executing court
proceeded to pass an order dated 29.11.2014.
(xi) Thereafter, vide Order No. 41 dated 09.03.2015, the District Judge,
Nuapada, directed the Petitioners to ensure maintenance of a
sufficient amount in their bank account. Subsequently, vide Order No.
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25 dated 04.09.2015, the Petitioners were further directed to file an
affidavit disclosing their bank account details and particulars of
immovable property.
II. SUBMISSIONS ON BEHALF OF THE PETITIONERS:
3. Learned counsel for the Petitioners earnestly made the following
submissions in support of his contentions:
(i) The Petitioners submitted that the impugned award dated 23.08.2013
passed by the MSEF Council, along with the orders dated 09.03.2015
and 04.09.2015 passed by the District Judge, Nuapada, are illegal,
arbitrary, and passed in gross violation of the principles of natural
justice, and are therefore liable to be set aside.
(ii) The Petitioners submitted that while rendering the impugned award,
the MSEF Council did not consider or deal with the documents on
record, which is evident from the Council’s subsequent order dated
11.11.2014 directing re-examination of the matter, and hence, the
award dated 23.08.2013 is erroneous, bad in law, and liable to be set
aside.
(iii) The Petitioners submitted that the initiation of proceedings by the
MSEF Council under Section 18 of the Micro, Small and Medium
Enterprises Development Act, 2006 was without jurisdiction, as the
claim of Opposite Party No.2 pertains to the year 1994, which is prior
to the enactment of the said Act. Proceedings before the MSEF
Council are maintainable only in respect of claims arising from
contracts entered into and executed after the commencement of the
Act.
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Location: ORISSA HIGH COURT, CUTTACK
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(iv) The Petitioners further submitted that the claim of Opposite Party
No.2 pertains to alleged charges for unloading, transportation, and
other services in relation to supplies made in the year 1994. The claim,
being in the nature of a money claim, was raised after a lapse of
sixteen years and is therefore barred by limitation under Article 26 of
the Limitation Act, 1963. On this ground as well, the impugned award
is liable to be set aside.
(v) The Petitioners submitted that the bills on the basis of which M/s.
Steel and Steel Products, Opposite Party No.2, has claimed the
principal amount of Rs. 47,081/- are disputed, as they are neither
authentic nor related to any actual supplies made to the Petitioners.
The claims are vexatious, appear to have been made for ulterior
purposes, and were raised long after the relevant programme had
already been closed and wound up. The Petitioner further submitted
that the MSEF Council failed to examine these aspects and, without
proper scrutiny, passed an award directing payment of the principal
amount along with interest totalling Rs. 97,13,900.66. The award is,
therefore, arbitrary, bad in law, and liable to be set aside.
(vi) The Petitioners submitted that even assuming, without admitting, that
the provisions of the Act of 2006 apply to the present case, the
proceedings before the MSEF Council amounted only to conciliation.
As per the statute, arbitration could be initiated only after failure of
conciliation. Since no conciliation was conducted, the Council lacked
authority to pass an award directing payment of Rs. 47,081 with
compound interest at three times the RBI bank rate.
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(vii) The Petitioners contended that a perusal of the order dated 11.11.2014
shows that the MSEF Council itself found it necessary to re-verify and
re-examine the documents forming the basis of Opposite Party No.2’s
claim. This indicates that the earlier award was passed without proper
evidence, reflects non-application of mind, and is perverse. The award
is therefore liable to be quashed.
III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:
4. The Learned Counsel for the Opposite Parties earnestly made the
following submissions in support of his contentions:
(i) The arbitral award has attained finality and become enforceable as a
decree, as it was not challenged within the statutory period prescribed
under Section 34(3) of the Arbitration and Conciliation Act, 1996. It
was contended that the present writ petition is not maintainable, since
the only remedy was to file an application under Section 34, which the
Petitioners failed to pursue within the prescribed time. A challenge
under Article 226 is impermissible in view of the self-contained
mechanism under the Arbitration Act.
(ii) Despite full knowledge of the statutory framework and expiry of
limitation, the Petitioner chose to file this writ petition as a belated
attempt to delay execution proceedings and seek indulgence for
condonation of delay before the appropriate forum.
(iii) The Petitioners had admitted to the claim during and after the
proceedings before the MSEF Council, including by requesting
Opposite Party No. 2 to furnish bank details for disbursement of the
awarded amount. They also submitted an application seeking
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Date: 24-Jun-2025 16:53:36reduction in interest after the award was passed, which amounts to
admission of liability.
(iv) The Petitioners never raised objections to jurisdiction or the claims
before the MSEF Council, nor did they invoke Section 16 of the
Arbitration Act. They are now estopped from challenging the award
or jurisdiction in this writ petition.
(v) The grounds raised in the present writ were never raised before the
MSEF Council or the appropriate forum, and similar objections were
already rejected by the executing court in Execution Case No. 04/2014.
The petitioners are thus barred from re-agitating the same
contentions.
(vi) The claim originally filed under the repealed 1993 Act is saved under
Section 32(2) of the MSMED Act, 2006, and is well within limitation.
The MSEF Council had jurisdiction to adjudicate the dispute.
(vii) The award passed by the MSEF Council is valid, reasoned, and based
on the Petitioners’ own admissions and representations. The award
directs payment of Rs. 47,081 along with statutory interest under the
MSMED Act, which the Petitioner had agreed to pay.
(viii) Conciliation proceedings were duly conducted, and the Petitioners
admitted the claims of Opposite Party No. 2 during the process. On
failure to comply, the Council lawfully proceeded to pass the award.
IV. COURT’S REASONING AND ANALYSIS:
5. Heard learned counsel for the parties and perused the materials on
record.
6. At the outset, it is necessary to delineate the legal framework
governing the present dispute.
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7. The arbitral award in question was rendered by the Micro and Small
Enterprises Facilitation Council under Section 18 of the Micro, Small
and Medium Enterprises Development Act, 2006, which provides a
special dispute resolution mechanism for claims arising under Section
17, regarding delayed payments to MSMEs. At the relevant time,
Section 18 envisaged conciliation as the initial step in the dispute
resolution process. The Council could either conduct the conciliation
itself or refer the matter to any institution or centre providing
alternate dispute resolution services. Upon failure of conciliation, the
Council was empowered to act as an arbitral tribunal or refer the
matter for arbitration, with the proceedings governed by the
Arbitration and Conciliation Act, 1996. The term “conciliation” in
Section 18 was subsequently substituted with “mediation” by the
Mediation Act, 2023.
8. Section 18 of the Micro, Small and Medium Enterprises Development
Act, 2006, further mandates resolution of references within ninety
days. Therefore, once the Council assumes the role of an arbitral
tribunal, the entire process stands subsumed within the framework of
the Arbitration and Conciliation Act, 1996.
9. Consequently, any challenge to such an award must be mounted
strictly in accordance with Section 34 of the Arbitration and
Conciliation Act, 1996, which governs applications for setting aside
arbitral awards.
10. Section 34(3)of the Arbitration and Conciliation Act, 1996, prescribes a
rigid limitation period of three months from the date of receipt of the
award, extendable by a further period of thirty days only upon
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showing sufficient cause. The proviso makes it abundantly clear that
no application shall be entertained beyond this outer limit of 120 days.
11. The Supreme Court in Union of India v. Popular Construction Co.1
observed that the words “but not thereafter” used in the proviso to
Section 34(3) constitute a legislative bar to any challenge being
entertained beyond the prescribed 120-day period, even by invocation
of Section 5 of the Limitation Act.
12. Similarly, in Mahindra & Mahindra Financial Services Ltd. v.
MaheshbhaiTinabhaiRathod2, reaffirmed that the strict limitation
period for challenging arbitral awards under Section 34(3) of the
Arbitration and Conciliation Act, 1996 is absolute and non-extendable
beyond 120 days.
13. Furthermore, the Arbitration and Conciliation Act, 1996 is a self-
contained code that strictly curtails judicial intervention to the extent
expressly permitted under the statute. The invocation of writ
jurisdiction under Article 226 to circumvent or override this statutory
framework has been consistently discouraged by the courts.
14. In Deep Industries Limited v. ONGC3, the Supreme Court cautioned
that High Courts must refrain from entertaining writ petitions under
Article 226 or 227 which effectively re-examine issues reserved for
arbitral adjudication. It was observed as hereinunder:
“22. … The drill of Section 16 of the Act is that where a
Section 16 application is dismissed, no appeal is provided
and the challenge to the Section 16 application being1
(2001) 8 SCC 470.
2
(2022) 4 SCC 162.
3
(2020) 15 SCC 706.
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dismissed must await the passing of a final award at which
stage it may be raised under Section 34. What the High
Court has done in the present case is to invert this statutory
scheme by going into exactly the same matter as was gone
into by the arbitrator in the Section 16 application, and then
decided that the two-year ban/blacklisting was no part of the
notice for arbitration issued on 2-11-2017, a finding which
is directly contrary to the finding of the learned arbitrator
dismissing the Section 16 application. For this reason alone,
the judgment under appeal needs to be set aside. Even
otherwise, as has been correctly pointed out by Mr Rohatgi,
the judgment under appeal goes into the merits of the case
and states that the action of putting the Contractor and his
Directors “on holiday” is not a consequence of the
termination of the agreement. This is wholly incorrect as it
is only because of the termination that the show-cause notice
dated 18-10-2017 proposing to impose a two-year
ban/blacklisting was sent. Even otherwise, entering into the
general thicket of disputes between the parties does not
behove a court exercising jurisdiction under Article 227,
where only jurisdictional errors can be corrected.”
15. Likewise, in Bhaven Construction v. Sardar Sarovar Narmada Nigam
Ltd.,4the Supreme Court observed:
“18. …It is therefore, prudent for a Judge to not exercise
discretion to allow judicial interference beyond the
procedure established under the enactment. This power
needs to be exercised in exceptional rarity, wherein one
party is left remediless under the statute or a clear “bad
faith” shown by one of the parties. This high standard set by(2022) 1 SCC 75.
4
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this Court is in terms of the legislative intention to make the
arbitration fair and efficient…”
16. Turning to the facts of the present case, the record reveals that the
petitioners actively participated in the arbitral proceedings before the
MSEF Council without raising any jurisdictional objection under
Section 16 of the 1996 Act. Their post-award conduct, particularly a
letter from Petitioner No. 2 seeking the opposite party’s bank account
details for disbursal of the awarded amount, demonstrates clear and
unequivocal acquiescence to the arbitral award.
17. Rather than availing the statutory remedy under Section 34 within the
prescribed limitation period, the petitioners sought reduction of the
rate of interest before the MSEF Council, a course of action wholly
inconsistent with any challenge to the validity of the award.
18. Further, it is evident that the present writ petition was filed nearly
two and a half years after the award was passed, and more than two
years after execution proceedings had already been initiated. No
credible explanation has been furnished for this inordinate delay. It is
settled law that writ jurisdiction cannot be invoked to sidestep
statutory remedies or revive claims barred by limitation.
19. The principle of estoppel squarely applies. The petitioners did not
challenge the jurisdiction of the MSEF Council during the arbitral
proceedings and made no attempt to set aside the award within the
prescribed timeframe. In BSNL v. Motorola India Pvt. Ltd.5, and the
Supreme Court held that under Section 4 of the 1996 Act, a party that
[2009] 2 SCC 337.
5
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proceeds with arbitration despite knowing of a procedural lapse
without promptly objecting waives its right to object later.
V. CONCLUSION
20. In view of the foregoing discussion, this Court is of the considered
opinion that no interference is called for under Article 226 of the
Constitution.
21. The arbitral award dated 23.08.2013 was never challenged under
Section 34 of the Arbitration and Conciliation Act, 1996 within the
prescribed limitation period and has, therefore, attained finality. The
petitioners’ conduct clearly reflects acquiescence, and the present
challenge appears to be a belated and unmerited attempt to reopen
settled proceedings.
22. Accordingly, the Writ Petition is dismissed.
23. Interim order, if any, passed earlier stands vacated.
(Dr.S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the20th June, 2025
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